Regulators in the United States will get access to mainland companies' audit documents under a deal announced yesterday, opening the way to probes of bungled audits after a two-year stand-off between Beijing and Washington.

The non-binding deal is only a partial victory for the US, which has been blocked from investigating accounting scandals at dozens of mainland companies listed on US stock exchanges.

It applies only to enforcement cases against auditors, not against mainland-based companies suspected of accounting fraud. And it does not allow US regulators to do on-the-ground inspections of auditors on the mainland, a key part of efforts to combat fraud.

"This is a step in the right direction," said James Doty, chairman of the Public Company Accounting Oversight Board, the US regulator for audit firms.

The agreement does not replace the need for the board to inspect audit firms in China, he said. The pact calls for the board to co-operate with its counterparts on the mainland, the China Securities Regulatory Commission (CSRC) and the Ministry of Finance, on the exchange of documents. Any non-public documents exchanged will be kept confidential, according to a memorandum of understanding between the agencies.

The signing of the memorandum "is a significant step in China-US audit oversight" and paves the way for cross-border enforcement assistance between the two countries, the CSRC said.

Investors have lost billions of dollars on Chinese companies selling shares on US exchanges in accounting scandals since 2010. Many of those companies have been removed from US exchanges, but hundreds still have shares trading there.

The deal may not resolve a lawsuit filed by the US Securities and Exchange Commission against five top audit firms in China over their refusal to turn over documents. Under the agreement, the board can share documents with the SEC, but only if they were obtained for a board enforcement action.

In December, the SEC charged the Chinese affiliates of the accounting firms Deloitte, KPMG, PricewaterhouseCoopers, BDO and Ernst & Young with securities violations for their refusal to produce audit papers.

The firms said that turning over the papers would put them in violation of the mainland's state secrets law.

The oversight board has been negotiating with Beijing for more than two years to get access to documents and permission to do joint inspections with the mainland authorities.

Beijing resisted out of concern about exposing state secrets, triggering a high-stakes stand-off and raising the risk that mainland-based auditors would be deregistered by the PCAOB. That in turn could have triggered massive stock exchange delistings of mainland-based companies.

The agreement represents an important change in the stance of Chinese authorities, Doty said. It was likely they realised they need to be more transparent to have access to international capital markets, he said.

Spokesmen at Hong Kong's Securities and Futures Commission and at Ernst & Young declined to comment.

This article appeared in the South China Morning Post print edition as Beijing signs audit deal with U.S.